Data analytics: A leading advantage in the FMCG industry
Post COVID-19, companies continue to grapple with increasing costs and high interest rates while seeking to satisfy the ever increasing demands of consumers.
Geopolitical tensions also continue to disrupt supply chain routes, increasing shipping costs and price volatility, creating pressures on companies and individuals.
Despite these challenges, the Fast-Moving Consumer Goods (“FMCG”) industry in Ghana continues to experience growth attributable to an increasing middle class with disposable income and increased spending, among other factors.
The FMCG market in Ghana comprises of products and services that can be grouped into food and beverages, personal care, home care and health care.
FMCG products are available for sale through varied channels such as formal and informal retailers, directly from manufacturers and more recently, through e-commerce.
In our markets, neighbourhood stores, along the streets and on social media, we constantly purchase products that we consume from
when we wake up until we go to bed. FMCG goods are an important part of our everyday lives.
The competition in the FMCG industry continues to increase due to a high turnover of consumer goods, among others.
The FMCG Industry currently includes multinational companies, local companies and more recently relatively small businesses owned
by foreigners from India, Lebanon, China, and other European countries.
Customers currently have a large variety of products to choose from and businesses have the task of increasing marketing efforts to attract customers to purchase their goods.
FMCG businesses have to also manage the changing behaviours of consumers.
Consumers are increasingly becoming more mindful of sustainability and ethical considerations when making purchasing decisions. Middle class customers continue to spend more time on their mobile phones and prefer to interact with these businesses through social media.
To stay ahead of the curve, FMCG companies must be innovative and ensure efficient resource allocation to ensure value creation and retention.
The added edge of employing Technology in the FMCG industry
The challenges faced by companies in the FMCG sector include lack of customer loyalty, fluctuating demands, supply chain disruptions and pollution of the environment. To ensure the efficient allocation of resources, most FMCG companies adopt an agile operating style.
An agile operating style allows a company to rapidly respond to environmental changes and the ever–changing customer demands.4
The use of technology is one of the surest ways to tackle these challenges and build on emerging opportunities in this evolving marketspace.
By adopting advanced data-driven analytics tools, FMCG companies manage, if not mitigate, their vulnerability to the
impacts of the ever-changing consumer trends.
The FMCG sector is dynamic and includes the management of many moving parts such as supply chain management, marketing, pricing, product returns and changing customer behaviours.
The analysis of data on customer behaviour, elements along the supply chain as well as sale and marketing trends through data analytics
can identify patterns.
Based on these patterns, management of FMCG businesses can make informed decisions on purchases and marketing campaigns which drive up value for owners of these FMCG businesses.
In the ensuing paragraphs, we will expound on some of the benefits of actively using data and analytics in the FMCG industry.
Benefits of integrating analytics in the FMCG industry
Promoting a greater understanding of customer behaviour FMCG companies require greater insights into ever-shifting
consumer tastes to efficiently target promotions to retain existing customers and attract new customers. Data driven analytics tools
enable FMCG businesses to better understand purchase habits and pricing sensitivity of consumers, among others. FMCG companies
are also able to profile, segment, and analyze customer data.
The application of analytics can provide FMCG companies with the needed insights on customers to remain relevant with customers and stay ahead of competition. Employing analytics equips FMCG companies to move from a reactive to a preventive strategy.
Information on customer experiences can be collected through qualitative and quantitative research methods. The data collected
can be analyzed to gain insights on the effect of the existing marketing strategies on customers to make the necessary
improvements to foster customer loyalty.
Analyzing customer data may also enable FMCG businesses to identify customer needs and preferences that may lead to product enhancements or new products and make informed decisions on branding, pricing, and designing customer experiences
Reducing the possibility of fraud
According to Kroll’s 2023 Fraud and Financial Crime Report, 69% of 400 executives surveyed across the globe on the landscape of
financial crime and technology expect crime risks to increase in the next 12 months with cybersecurity and data breaches being
the leading occurrences.55 According to the Business Insider, cyber fraud activities carried out in the first half of 2023 accounted for
about GHS49.5m leading to financial losses in Ghana.
Identifying scammers and crooks is now essential, especially with the increase in e-commerce and online shopping. Data analytics can be used to identify suspicious trends in real time so that further investigations can be conducted prior to accepting such orders.
This would surely reduce the volume of financial losses being incurred as a direct result of fraud.
Ensuring efficient demand forecasting
Demand forecasting is a technique used to predict the future demand of a product and involves the real-time analysis of the past demand
of a product that is currently on the market.
This is an important activity in the FMCG industry and determines the volume of goods made available for sale. The unavailability of a product on a shelf will lead to customers trying out the products of competitors.
However, this is an occurrence that companies seek to avoid by ensuring that their products are always available for customers to purchase.
The integration of analytics in forecasting will equip FMCG businesses to consider different perspectives such as the complexities of the retail environment, the interdependencies between the supply chain and consumer preferences. Including a range of variables in a demand
forecast and adjusting the variables as appropriate is likely to generate accurate forecasting and reduce expenses while increasing
profits. The advantages of demand forecasting include making data driven decisions, assisting with short- term and long-term planning
and reducing costs.
Improving Customer Retention
The FMCG industry is highly competitive and capturing customer loyalty is crucial. Data analytics can assist marketing and sales teams
to efficiently target an audience for their products.
The application of data analytics will assist businesses to tailor their customer retention strategies to the various customer segments. By understanding the behaviours of customers through customer analytics, a company can determine the customer segments that their products are a best fit for.
A company can then go on to design customer retention strategies that meet the various customer segments and design
strategies to develop a long – term business relationship.
This is likely to result in product recommendations by clients, increased upselling and cross selling of other products and services and increased overall customer loyalty.
Integrating Forecasting and Logistic Decisions
FMCG businesses need to make important decisions on the levels of inventory to hold at each point. Some of the important questions that need answers are; What is the appropriate ratio of work – in – progress to finished goods? How much inventory should be held in warehouses and retailers?
The application of data analytics can be used to answer these questions to keep up with customer demand.
FMCG businesses can coordinate all inventory management, forecasting and logistics seamlessly to ensure efficiency. Through the application of data analytics, FMCG companies can monitor inventory levels and generate realistic demand projections. FMCG businesses can generate and review the different capacities for forecasting.
The benefits of this include escalating shelf availability, balancing raw materials, work in progress and finished goods and promoting
workforce effectiveness.
How to Respond
What are the steps that FMCG businesses can take to incorporate data analytics into their operations to benefit from the advantages
stated above?
• Clearly define your digital strategy and what you seek to achieve
To achieve maximum results from employing data analytics, a comprehensive strategy must be developed that clearly spells
out the goal of the company, the operating model to be used to deliver this strategy and the required tools that will support the delivery of the strategy. In developing a digital strategy, companies can consider utilising machine learning and AI to uncover deeper insights, predict trends, and automate decision making. Additionally, companies can adopt predictive analytics to forecast future trends and prescriptive analytics to suggest actions for achieving desired outcomes. A digital strategy. This should not be implemented as an isolated project as this will not reap maximum results for a company.
• Allocate the required investments for this agenda
Investments need to be made in the appropriate tools and people to equip them to efficiently use them. When rolling
out new tools, sufficient time must be allocated for teams to become accustomed to the tools. Companies must also work
on attracting the right talent by modifying their recruitment process to reflect their current needs. When making investment
decisions, executives can consider deploying advanced analytics platforms that handle large data volumes and provide real-time insights, ensuring scalability for business growth. Executives can also leverage cloud computing solutions for efficient, flexible, and cost-effective data storage and processing.
• Ensure you have digitally savvy leaders
Executives of companies should not only champion digital transformation but should understand the agenda they are promoting. FMCG companies should ensure that they have digitally savvy leaders who encourage their team to adopt technology in their day-to-day activities It is important to promote data literacy by offering training programs to help employees interpret and apply data in their roles. A culture that promotes experimentation and encourages teams to try data driven initiatives and learn from the outcomes must be created.
In addition, continuous learning programs should be put in place to keep teams updated on the latest trends, tools, and techniques in data analytics.
Executives must build their confidence in making data-driven decisions to encourage employees to utilise data tools in their
daily tasks. Establishing a skilled analytics team by hiring experts with FMCG sector knowledge and encouraging cross
departmental collaboration is critical to infusing data analytics into the core of a company’s operations.
How PwC can support you to Add Value to your Firm
At PwC we have the requisite experience to support FMCG firms to scale up their operations by integrating data analytics into their systems.
The best time to begin is today. As a business executive, you can channel the resilience with which you navigated through recent geopolitical pressures to achieve your digital aspirations.
PwC offers extensive expertise to help FMCG firms integrate data analytics into their operations, driving innovation and efficiency.
We provide tailored solutions to develop a comprehensive digital strategy, ensuring your business leverages cutting-edge tools and
practices.
Our support includes:
• Crafting and implementing a data-driven culture within your organization.
• Training and developing your workforce to become proficient in data literacy and analytics.
• Deploying advanced analytics platforms and cloud computing solutions.
• Utilizing machine learning, AI, predictive, and prescriptive analytics to enhance your business processes.
• Ensuring compliance with data security and privacy regulations.